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Mintz Litigation Team Achieves Significant Victory for Citizens Bank in $100 Million Ponzi Scheme Lawsuit

On November 13, a Mintz litigation team achieved a significant victory for client Citizens Bank, N.A. when the U.S. Court of Appeals for the Second Circuit affirmed a New York federal judge's decision to toss out a lawsuit brought by a proposed class of investors claiming Bank of America N.A. and Citizens Bank facilitated an over $100 million Ponzi scheme. In its Summary Order, the Second Circuit upheld that investors had not adequately demonstrated that the banks were aware of the alleged fraudulent scheme.

In the underlying matter filed in 2018, plaintiffs Mary Beth Heinert and Richard H. Schultz Jr. brought a putative class action lawsuit against Bank of America and Citizens Bank, and several individual defendants, on behalf of approximately 637 investors across the United States claiming to have lost more than $100 million in a nearly decade-long Ponzi scheme orchestrated by Perry Santillo, Christopher Parris, Paul Anthony LaRocco, John Piccarreto, and Thomas Brenner. According to the lawsuit, the five individual defendants converted a previously legitimate investment enterprise into a fraudulent scheme, by which they misused and misappropriated investor funds to pay off previous investors and for personal purposes. The plaintiffs also sought to hold Citizens Bank and Bank of America liable for the losses, bringing claims against the banks for aiding and abetting common law fraud, aiding and abetting a breach of fiduciary duty, and conspiracy to defraud under New York law. In particular, plaintiffs argued that the banks had acquired knowledge of the fraud through interactions with the individual defendants, who banked at local branches of Bank of America and Citizens Bank.

In October 2019, a U.S. District Judge for the Western District of New York dismissed with prejudice all of plaintiffs’ claims against Bank of America and Citizens Bank for failure to state a claim on which relief may be granted.

Plaintiffs appealed the ruling, and on November 13, 2020, a three-judge Second Circuit panel agreed with the New York federal judge’s dismissal and Mintz’s argument that plaintiffs “failed to adequately plead that the banks or their employees had actual knowledge of any breach of fiduciary duty.”

The Mintz litigation team that represented Citizens Bank was led by Member and Co-chair of the firm’s Financial Services Practice Pete Michaels and included Member Kevin Ainsworth, Of Counsel Michael Pastore, and Associate Alyssa Scruggs.